New York regulator launches investigation into stablecoin issuer Paxos – Is Binance BUSD in trouble?
So, in particular, Paxos, a prominent player in the stablecoin market, which issues Binance USD ( BUSD ) and native stablecoin Paxos USDP, is under investigation by the New York Department of Financial Services (NYDFS).
That could be what caught the attention of the authorities, as the SEC forced Kraken to shut down bids this week.
Another project that could gain attention is Paxos’ gold-backed cryptocurrency PAXG. A real asset (RWA) token that holds gold in Brinks Vault, London for investors.
PAXG, BUSD and USDP remain pegged at the time of writing.
The investigation into Paxos was launched after it applied for a full banking charter
The investigation into Paxos comes after the company applied for full banking status. Despite reports of concerns from central financial authorities, the New York-based blockchain infrastructure company has established itself as a leader in the industry.
Paxos operates in New York with a coveted BitLicense from the NYDFS and has also received a Master Payment Institution License from the regulator in Singapore to increase its presence in Asia.
Despite rumors that the US Office of the Comptroller of the Currency (OCC) plans to require Paxos to withdraw its application for full banking status, the company has categorically denied such claims.
What we do know is that the OCC granted Paxos interim banking status in 2021. We also have an assumption that the authorities are not completely against the idea of proper licensing of the issuer.
Indeed, after the collapse of the Luna ecosystem through TerraUSD NYDFS has published guidelines that stablecoin issuers must follow. Paxos likely addressed these requests as part of ongoing efforts to secure its full banking charter.
However, as regulators appear poised to continue legislating the crypto industry this year, markets are on edge, especially as Paxos manages BUSD at a time when uncertainty is clouding the Binance exchange.
An extended investigation into a leading exchange’s flagship stablecoin could spell big trouble for the industry.
